6 ms·

Many HFT systems provide liquidity. If there is no liquidity, retail investors like you or me cannot buy or sell. Just imagine you want to exchange a currency

Many HFT systems provide liquidity. If there is no liquidity, retail investors like you or me cannot buy or sell. Just imagine you want to exchange a currency because you go traveling and the exchange tells you "Sorry, nothing available right now, gotta come back in a few weeks". That's what would happen if there is no liquidity.

roenxi 7y ago
It isn't obvious that the retail investors are that excited by sub-second liquidity. Speaking personally, I'd even be happy to wait several seconds to see if someone else is willing to pay a better price.
- vecter 7y ago
  That's not how things work. You would see much less demand/supply for a particular stock at every price level, which means you'd pay much more to buy less and would have to pay much more to sell less also. There are no upsides to having fewer market makers.
  - roenxi 7y ago
    > you would see much less demand/supply Why? If the HFT firm was willing to offer me $X 2 milliseconds ago they are probably still willing to offer $X now. It isn't like there has been time for anything to change; there are going to be short periods of time where there is literally no new information. And they are just as likely to be offering me more now than less as conditions change.
    - gnaritas 7y ago
      > It isn't like there has been time for anything to change Wrong, other buyers or sellers could have put in orders in that time changing the price.
    - gpderetta 7y ago
      if they weren't able to move their price 2 milliseconds later, they wouldn't offer $X in the first place.
akra 7y ago
I always had questions about the liquidity on offer though seeing participants flee the market in black swan events. HFT liquidity could be illusionary - its only there when its not quite required similar to how the bank "only offers you a loan when you don't need one". Of course this is exactly the point when liquidity is required; normally there's sufficient liquidity in normal times from market participants. Its easy to offer liquidity in normal times; harder to do so when no one else wants to offer it.
- wellactually 7y ago
  Offering liquidity is not equivalent to offering free money. The offer comes at a cost.
- kortilla 7y ago
  > normally there's sufficient liquidity in normal times from market participants. Not really. The spreads were terrible before HFT market making.
perl4ever 7y ago
We obviously can have liquidity on in-between timescales, because we had it before modern HFT trading, right? The average person may be overly paranoid about HFT, but it doesn't make sense to say they benefit from it, because they are not going to be in a position where they benefit from an execution in a fraction of a second. Price improvement of fractions of a penny has gotten silly too. It's easy to think of it as more significant than it is, until you figure it as a percentage (or the spread for that matter). It's kind of like how ultra-sensitive people are to gas prices...
- growse 7y ago
  Before HFT, we had enormous spreads and expensive trades on many instruments in many markets. Smaller spreads lower costs for everyone: institutional, retail etc.
  - perl4ever 7y ago
    When exactly are you thinking of? Are you old enough to remember before decimalization? Do you consider that "enormous"?

roenxi 7y ago

It isn't obvious that the retail investors are that excited by sub-second liquidity. Speaking personally, I'd even be happy to wait several seconds to see if someone else is willing to pay a better price.

vecter 7y ago
That's not how things work. You would see much less demand/supply for a particular stock at every price level, which means you'd pay much more to buy less and would have to pay much more to sell less also. There are no upsides to having fewer market makers.
- roenxi 7y ago
  > you would see much less demand/supply Why? If the HFT firm was willing to offer me $X 2 milliseconds ago they are probably still willing to offer $X now. It isn't like there has been time for anything to change; there are going to be short periods of time where there is literally no new information. And they are just as likely to be offering me more now than less as conditions change.
  - gnaritas 7y ago
    > It isn't like there has been time for anything to change Wrong, other buyers or sellers could have put in orders in that time changing the price.
  - gpderetta 7y ago
    if they weren't able to move their price 2 milliseconds later, they wouldn't offer $X in the first place.

akra 7y ago

I always had questions about the liquidity on offer though seeing participants flee the market in black swan events. HFT liquidity could be illusionary - its only there when its not quite required similar to how the bank "only offers you a loan when you don't need one". Of course this is exactly the point when liquidity is required; normally there's sufficient liquidity in normal times from market participants. Its easy to offer liquidity in normal times; harder to do so when no one else wants to offer it.

wellactually 7y ago
Offering liquidity is not equivalent to offering free money. The offer comes at a cost.
kortilla 7y ago
> normally there's sufficient liquidity in normal times from market participants. Not really. The spreads were terrible before HFT market making.

perl4ever 7y ago

We obviously can have liquidity on in-between timescales, because we had it before modern HFT trading, right? The average person may be overly paranoid about HFT, but it doesn't make sense to say they benefit from it, because they are not going to be in a position where they benefit from an execution in a fraction of a second. Price improvement of fractions of a penny has gotten silly too. It's easy to think of it as more significant than it is, until you figure it as a percentage (or the spread for that matter). It's kind of like how ultra-sensitive people are to gas prices...

growse 7y ago
Before HFT, we had enormous spreads and expensive trades on many instruments in many markets. Smaller spreads lower costs for everyone: institutional, retail etc.
- perl4ever 7y ago
  When exactly are you thinking of? Are you old enough to remember before decimalization? Do you consider that "enormous"?